RALEIGH, N.C.–What earlier this year was billed as “the Most Remarkable CU Story Ever Told” came to a close over the weekend when, after 42 years, Local Government Federal Credit Union became fully independent from State Employees’ Credit Union.

The move follows a merger between LGFCU and Civic FCU. The $4-billion LGFCU has approximately 405,000 members representing all of North Carolina’s 100 counties and 540 towns, cities and villages.

Civic FCU President and CEO Wayne Naylor discussed the plans for separating the two organizations along with SECU President and CEO Leigh Brady earlier this year as part of Mitchell Stankovic’s Underground meeting. Coverage of that discussion, which was billed as “The Most Remarkable CU Story Ever Told,” can be found here

‘Historic Event’

“This is a historic event,” Naylor told the Island Free Press. “We built Civic for this moment — to deliver powerfully personal services to LGFCU and Civic members at just the right time. That time is now here, and we couldn’t be more excited.”

Naylor began his career as a loan officer at SECU.

The $119-million Civic FCU has approximately 7,700 members. 

With significant assistance from the SECU, the world’s second-largest credit union, LGFCU was created to serve North Carolina’s local government employees and volunteers, elected and appointed officials, and their families. It used SECU’s backoffice services and members could use SECU’s extensive branches and ATM network.

Driven by Court Decision

A Supreme Court decision in 1979 on lawsuits brought by banks that SECU’s membership was too broad required SECU to expel local government employees, the Island Free Press noted. SECU then assisted LGFCU in obtaining a federal charter in 1983.

SECU agreed to provide many support services, including use of its ATMs and branches, in return for a fee of 25% of Local Government’s gross income. Those fees now total nearly $40 million annually, reported BusinessNC.

Civic Credit Union was formed in 2018 when SECU opted to no longer service the accounts of service organizations. The move allowed members access to more financial products and solutions, including an Interest-only home equity line of credit (HELOC), a VA mortgage, FHA mortgage, and others that are not available via SECU, the publication noted.

‘Key Role’ Played

“Naylor, 64, played a key role as Local Government started the affiliated Civic Federal Credit Union as a digital-only institution in 2018,” Business NC reported. “With liberalized rules over who can join credit unions, Civic’s goal was to attract tech-savvy customers who were less likely to visit bank branches,

“Five years later, he took charge of both organizations,” the report continued. “With backing from a nine-member board of directors, he helped institute a new strategy that ends Local Government’s tight relationship with SECU and eliminates the Local Government brand in favor of the Civic moniker.”

BusinessNC noted that covering ATM fees is an expense Civic is paying for members, an expense it expects to be offset by savings from no longer paying $40 million a year to SECU, according to Naylor.

Losses Were Planned

“We’re building this whole infrastructure,” Naylor told the publication, acknowledging that the costs have led to temporary losses. Local Government, which had been profitable since its inception, reported a combined net loss of $16.9 million in 2023-24. It lost another $5.2 million in the first two months this year.

The losses were expected, Naylor stated, and reflect “the cost of becoming independent from SECU this June and building our systems and staff. We’ll become more and more efficient, and then will flourish on the other side,” BusinessNC quoted Naylor as saying.

Delay in Separation

The Island Free Press noted that the LGFCU/SECU split was initially scheduled to take place in the spring of 2024, but was delayed an additional year.

As noted above, when it was chartered, plans called for Civic FCU to be a virtual operation only, but following member feedback it now has 11 branches in the state.